Examining the rankings offers clues to which emerging economies are on the rise and which will disappoint. One key: Good fortunes versus bad fortunes
Everyone enjoys the voyeuristic thrill of Forbes’ annual listing of the world’s billionaires, but as an emerging market investor I use the list as a tool to spot what I call Breakout Nations—economies poised to beat expectations, and rivals, over the next five to 10 years. Analysing the list can provide a quick read on an emerging economy. If the billionaire class controls fortunes that are outsize, compared with the size of the economy and its level of development, it’s a sign that an economy is out of balance. And if the same few names appear on the list year after year, with no new blood, it’s a sign of stagnation.
The emergence of billionaires is a good sign—if they are emerging in productive fields such as technology or manufacturing. In the 2000s, however, the world saw the rise of many billionaires who rely on government connections to build monopolies in sectors such as oil, real estate and mining—industries that traditionally contribute much less to sustainable growth because they are volatile and often prone to corruption. This type of billionaire is a bad sign.
Applying this analysis to the 2013 list yields some surprising results. For all the buzz about corruption and inequality in China, its billionaires control wealth equal to just 3.2 percent of its gross domestic product (GDP)—making this the least-bloated billionaire class among the big emerging markets. The average fortune of the top 10 Chinese billionaires is now $6.8 billion, still modest in an economy that was the single largest contributor to global GDP growth over the past decade. China also shows a healthy turnover among those top 10, with nine newcomers on the 2013 list compared with 2007. The country’s richest person, Wahaha Chairman Zong Qinghou, shot to the top this year, thanks to his fast-growing beverage business. Yet, his net worth of $11.6 billion is still smaller than the fortunes of leading tycoons in much smaller economies, including Malaysia and the Philippines.
In November, liquor tycoon Ponty Chadha, described by the press as a man who had prospered on “fistfuls of state favours”, was shot to death in a dispute over the ownership of a farmhouse outside New Delhi, an event that seemed to symbolise the rise and risks of the newly connected billionaire class.
(This story appears in the 05 April, 2013 issue of Forbes India. To visit our Archives, click here.)